1099 Risk Blog

Misclassification Epidemic: Part I

Worker misclassification, and the process by which the IRS identifies and handles such misclassifications, was highlighted by the Treasury as a critical issue in a report issued last month. The report’s title says it all: “While Actions Have Been Taken to Address Worker Misclassification, and Agency-Wide Employment Tax Program and Better Data Are Needed.”  The last review of the impact of misclassification (the improper assignment of employees into 1099 independent contractor status) dates back to 1986, and thus the IRS does not have a grasp on exactly what damage . . .

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Staffing Alliance Offers Revenue Channel for Battered Industry

The staffing industry is the hardest hit sector in America's economic downturn -- according to Staffing Industry Analysts, employment is off by over 22% -- but reaching into new and growing markets may be the key for staffing firms to diversify and regain their secure footing. According to the twitterstream, the word of the day at today's Staffing Industry Executive Forum was "nichey."  Topics of discussion ranged from diversity and government contracts to the dizzyingly complex and risky independent contractor segment, as top staffing executives explored ways to offer new . . .

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Healthcare Workers Bring Suit Alleging Misclassification

Healthcare workers that were classified as independent contractors by the Delta-T Group filed a lawsuit on February 17th claiming they were misclassified, according to a news item in MSNBC today. If the court agrees with their position -- that they should have been classified as employees -- then they have been unjustly denied overtime compensation, unemployment, benefits, payroll taxes, and worker's comp. The company could be forced to

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Contractor Classification Tip #5

Here's the next independent contractor classification tip in our series. Tip #5: 

Use the right engagement method.

After you've accurately assessed the status of your independent contractors, you must select the correct engagement method for your compliant and non-compliant contractors. To accurately assess but then incorrectly engage contractors defeats the purpose of doing contractor compliance in the first place, but we're surprised how often we encounter this practice.  Engage non-compliant contractors . . .  

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New Study Underscores Risk of Using Independent Contractors

With the nation facing the toughest economic times since The Great Depression, enterprises are being forced to reevaluate their current labor needs and implement alternative workforce strategies to effectively drive performance without sacrificing time, cost, or quality. A new study released by Aberdeen offers the latest benchmarks and numbers surrounding the use of contract labor, and in particular the risks and challenges for managing the growing sector of independent contractors.  Contract talent, also known as contingent labor, is a multi-faceted category that includes independent contractors and known for its complexity and risks. In 2009, enterprises will do their best to face a demanding economic environment and succeed in their respective contingent labor programs by driving performance from outside experts (managed service providers), automation (vendor management systems), and superior management of independent contractors via Independent Contractor Compliance and Engagement Specialists (ICES) like MBO Partners.

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The Forgotten Third

Today’s employment marketplace consists of a diverse composition of labor and talent from a wide variety of sources. Among them is a group that is collectively known as contracted talent or the contingent workforce. This group includes contractors, consultants, freelancers, temporary help, interim executives and others who are not part of an organization’s full-time or part-time workforce.

Contingent work has continually evolved since its inception. The 1950s temp who filled in for emergencies and maternity leave has given way to today’s skilled professional who may lead projects, serve in a critical technical capacity on a team, or even act as an interim CEO. Indeed . . .

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Research: Contract Talent and the Role of HR

New research published jointly by HCI and MBO Partners, The State of Contract Talent and the Role of HR, points out that contract talent, including independent contractors, is the fastest growing segment of the workforce, and a major strategic component of enterprise talent management. Despite this, however, HR is often not involved in the sourcing and engagement of contract talent, which is generally handled by procurement. The research report concludes that human resources and procurement are going to need to find new ways of collaborating in order to better handle the strategic management of the contract workforce, including consultants, freelancers, retirees, small services vendors, and independent contractors.

Check out this executive briefing slideshow that summarizes the research:

http://thetalenteconomy.com/ebriefings/stateofcontractmbo012109/

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Contractor Classification Tip #4

Here's the next independent contractor classification tip in our series. Tip #4:

Focus on real protections, and forget term limits. 

Many traditional practices, such as setting term or tenure limits, are virtually meaningless in the face of an IRS audit. In the real world, you can have co-employment risk if a misclassified worker is on the job for just six minutes! Case law precedent clearly demonstrates that practices like setting term limits or having workers sign independent contractor agreements are the kind of surface formalities that carry little weight in an audit or lawsuit, where substance trumps form. Make sure your program is founded on understanding the real risk factors, and presents real IC risk mitigation and compliance solutions. For example, if your compliance program relies on term limits or flimsy contractor agreements to imply that otherwise non-compliant contractors are “compliant,” you have risk.

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New Poll on Size of Contract Workforce

How big is your contract workforce? What proportion of your organization's workforce could be considered contingent or is contract-based? Please take a moment to visit our poll on LinkedIn: http://polls.linkedin.com/p/18415/hzyaj

In your answer, please include temps, independent contractors, seasonal hires, independent consultants, and single-person vendors. Essentially, consider anyone who is performing work in your organization that is not a "traditional" employee. Thanks for your help!

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E-Verify Delayed; Written Into Stimulus Package

The effective date of the E-Verify requirement for federal contractors has been delayed yet again to May 21. While some business groups are hoping the Bush-era rule will be reviewed and rejected by the Obama administration, other signs promise that, delay or no, E-Verify is here to stay. The House version of the economic stimulus package requires E-Verify for recipients of federal assistance. E-Verify is a free online system via DHS that employers can use to electronically check the immigration status of workers. For federal contractors that sub-contract work or hire independent contractors, 1099s, and single person companies, E-Verify raises new compliance issues that will need to be addressed.   

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